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Tickers in this Article: AAPL, AMZN, GOOG, BIDU, IBM, HPQ
It's always important to pay attention to market leaders as they can clue you in to what the institutional money is doing. Over the past few cycles, large cap tech stocks have been leading the way. Stocks like Amazon.com (Nasdaq:AMZN) and Google (Nasdaq:GOOG) have been rising steadily higher for several months while rolling over any bears that stand in their way. It is healthy for the markets when leadership comes from higher risk areas such as tech stocks, as it shows a willingness for investors to take on risk. When you see leadership in more conservative sectors like utilities or consumer staples, it shows investors are worried about a downturn and are seeking dividend-paying safe havens. The general markets will rarely make a sustained move without the cooperation of market leaders.

One stock that has been considered a market leader since the prior bull market is Apple (Nasdaq:AAPL). AAPL has been in a very steady uptrend since breaking out of a large bottoming pattern in late March 2009. Notice how its 20- and 50-day moving averages are in a nice steady trend higher, and how the averages act as support on dips. Trying to pick a top in this stock has been very painful for the bears, as AAPL continues to chug higher. Currently, AAPL is consolidating after its earnings related gap, and has a solid support level underneath near $185 and resistance near $209.

Source: StockCharts.com

Google (Nasdaq:GOOG) is another tech stock that has been in a very steady uptrend, and has shown no real signs of weakness lately. It also has steadily rising 20- and 50-day moving averages, and has been finding support on any pullbacks. GOOG is trading at 52-week highs, and while it's probably a little overbought, it is showing good strength against the general markets, which is a positive sign. Also, one of Google's peers to watch is Chinese search engine company Baidu (Nasdaq:BIDU).

Source: StockCharts.com

Another tech stock that has been performing well is International Business Machines (NYSE:IBM). IBM cleared a base in July on a large gap higher and never threatened to fill the subsequent void on the chart. It then recently followed through in October with a push to new highs, and is currently consolidating that move. The $129 level seems like the level to watch for a breakout higher, with the $118 level acting as a strong support area.

Source: StockCharts.com

In the computer hardware space, Hewlett-Packard Company (NYSE:HPQ) continues to roll higher as well. HPQ also has been trending steadily higher with very few signs of weakness. HPQ is at 52-week highs and has consistently found support on pullbacks to its rising moving averages. The $47 level looks to be a good support area, with the $50 area marking the most recent high.

Source: StockCharts.com

Bottom Line
While most of these stocks are not necessarily in great buying areas, their performance suggests that the market is still showing an appetite for risk. While there is some weakness in other groups, specifically in the small caps, the tech group is the group that should be watched at this point for market tells. This group has been supported by institutions over the past few market cycles, and any weakness in this group is likely to spill over to the rest of the market. Continued strength will bode well for an extension in the current market rally.

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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